The motor insurance taskforce has published its report on work to reduce and stabilise motor insurance premiums. The report shows that premiums have in fact been steadily dropping throughout 2025 and work will continue, particularly with the FCA’s report on premium finance next year, and the FCA working with the ABI and firms on better efficiency in claims handling.
The report found that nearly 2/3 of motorists use a price comparison website when looking for insurance. This, and the large number of underwriters in the market (100), mean the market is competitive and pricing responds quickly to external changes. However, in 2022 and 2023 prices rose by more than inflation, as did claims costs, such that firms also made underwriting losses during those years. There were several causes largely due to external factors outside firms’ control such as more expensive cars, labour shortages, increased costs of replacement cars, more thefts and high costs associated with uninsured drivers. Premiums had also fallen during the pandemic when people used their cars less.
The report also looks at the work the FCA is doing to simplify regulation, and at how the changes to the redress system should also work reduce compliance costs for firms.
As part of the work, the FCA has looked specifically at particular consumers, and has published its research note on motor insurance prices for consumers from minority ethnic backgrounds. It found that while there are large differences in overall costs between areas with high and low numbers of residents from minority ethnic backgrounds, this was largely associated with claims costs used as indicators of risk related to specific geographies, such as living in urban areas.
Among the recommendations of the task force are:
- that the FCA could consider using its powers to, for instance, limit risk factors firms can use or require them to publish pricing models – but it would not intervene directly in pricing decisions and does not necessarily think this would reduce premiums;
- that PCWs generally provide positive outcomes, even though they are focuses almost exclusively on price of cover rather than overall quality – and that the FCA has strong powers to overss their activities;
- that CMCs, while they can be important in helping consumers access appropriate redress can also introduce greater cost and complexity to claims;
- that bodily injury claims are increasing in value, and there could be a useful exercise in monitoring and managing trends;
- the prevalence of credit hire replacement vehicles has risen significantly while the length of repair time has also increased, all leading to more cost which the FCA says insurers are not managing effectively; and
- that drivers using telematics can be helpful, especially for young drivers, but uptake is still low.